Banner Corporation (BANR) Q1 2015 Earnings Report, Transcript and Summary

Good day and welcome to the Banner Corporation's First Quarter 2015 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Mark Grescovich, President and CEO. Please go ahead.

Thank you, Allison and good morning, everyone. I would also like to welcome you to the first quarter 2015 earnings call for Banner Corporation. As is customary, joining me on the call today is Rick Barton, our Chief Credit Officer, Lloyd Baker, our Chief Financial Officer, and Albert Marshall, the Secretary of the Corporation. Albert, would you please read our forward-looking Safe Harbor statement?

Certainly. Good morning. Our presentation today discusses Banner's business outlook and will include forward-looking statements. Those statements include descriptions of Management's plans, objectives or goals for future operations, products or services, forecasted financial or other performance measures and statements about Banner's general outlook for economic and other conditions. We also may make other forward-looking statements in the question-and-answer period following Management's discussion. These forward-looking statements are subject to a number of risks and certainties and actual results may differ materially from those discussed today. Information on the risk factors that could cause actual results to differ are available from the earnings press release that was released yesterday and a recently filed Form 10-Q for the quarter ended December 31, 2014. Forward looking statements are effective only as of the date they are made and Banner assumes no obligation to update information concerning its expectations. Thank you.

Thank you, Al. As announced, yesterday Banner Corporation got off to a good start for 2015 with another solid quarter. Reporting a net profit available to common shareholders of $12.1 million dollars, or $0.61 per share for the quarter ended March 31, 2015. This compared to a net profit to common shareholders of $0.54 per share for the first quarter of 2014 and $0.60 per share in the fourth quarter of 2014. Results for the quarter just ended, were impacted by acquisition related expenses which net of taxes, reduced net income by $0.07 per diluted share. Our core operating performance for the first quarter of 2015 maintained our positive momentum in further demonstrated that through the hard work of our employees throughout the Company, we continued to successfully execute on our strategies and priorities to deliver sustainable profitability to Banner and expand our balance sheet with strong organic loan and deposit growth coupled with opportunistic acquisitions. Our consistent and increasing quarterly profits show that the execution on our strategic plan is effective and we continue building shareholder value. Our first quarter 2015 core revenue was strong at $59.7 million, and increased 16% compared to the year ago quarter. We benefited from a large and improving earning asset mix. A net interest margin that remained above 4%, and was actually 4.09%, very good deposit fee income, and strong mortgage banking revenue. Also, our cost to deposits was 18 basis points compared to 22 basis points in the first quarter of 2014. Overall, this resulted in a solid return on average assets of 1.02% for the quarter. Once again, our strong performance this quarter reflects the continued execution on our super community banking strategy. That is, reducing our funding costs by remixing our deposits away from high-priced CDs, growing new client relationships, improving our core funding position, and promoting client loyalty and advocacy through our responsive service model. To that point, our core deposits increased 28% compared to March 31, 2014. Also, our non-interest-bearing deposits increased 37% from one-year ago. Although a large portion of this balance growth is from the addition of 16 new branches in Oregon, as a result of two acquisitions, we also continued to see strong organic generation of new client relationships. Our net client growth in these product categories is 93% since December 31, 2009. Further, our loan portfolio expanded 17% from a year ago. In a few moments, Lloyd Baker will discuss our operating performance in a more detail. While we have been effectively executing on our strategies to protect our net interest margin, grow client relationships, deliver sustainable profitability and prudently invest our capital, we have also focused on maintaining the improved the risk profile of Banner. Again this quarter, our credit quality metrics reflect our moderate risk profile and our non-performing assets are just 57 basis points of total assets at March 31, 2015. In a moment, Rick Barton, our Chief Credit Officer, will discuss the credit metrics of the Company and provide some context around the loan portfolio and our success at maintaining a moderate credit risk profile, while also increasing our loan portfolio. Given our successful credit risk management, our low of non-performing loans, and our moderate risk profile, we did not report a provision for loan losses in the quarter despite additional loan growth. Nonetheless, Banner's coverage of the allowance for loan losses to nonperforming loans is a strong 305% at March 31, 2015. Banner's reserve levels are substantial and our capital position and liquidity remain extremely strong. At the end of the quarter, our ratio of allowance for loan and lease losses to total loans was 1.83%. Our total capital to risk weighted assets ratio was 16.34% and our tangible common equity ratio was 12.04%. In the quarter and throughout the preceding 5 years, we continued to invest in our franchise. We have added talented commercial and retail banking personnel to our Company and we have invested in further developing and integrating all our bankers into Banner's proven credit and sales culture. While these investments have increased our core operating expenses, they have resulted in positive core revenue growth of 16%, strong customer acquisition, 17% year-over-year growth in the loan portfolio, improving cross sell ratios and strong deposit fee income growth of 23%. Further, we have received marketplace recognition of our progress and our value proposition as a small business administration named Banner Bank Community Lender of the Year for the Seattle and Spokane district for the second consecutive year and Forbes magazine ranked Banner Corporation as one of the top 50 most trustworthy financial institutions in the United States. The successful execution of our organic growth plan and our persistent focus on improving the risk profile of Banner has now resulted in 16 consecutive quarters of profitability and our tangible book value increased nearly 7% to $29.75 per share when compared to March 31, 2014. Finally, I am very excited about the recently closed acquisition of Siuslaw Bank and the announced acquisition of AmericanWest Bank. With these strategic combinations, we will have the opportunity to deploy our super community bank model throughout a strengthened presence in Washington, Oregon and Idaho and enter into attractive growth markets of California and Utah. These combinations will provide significant benefits to our expanded group of clients, communities, shareholders and employees. And I would like to welcome the Siuslaw Bank clients, employees, and shareholders who joined Banner Bank, the Banner Bank team, on March 6, 2015. I will now turn the call over to Rick Barton to discuss the trends in our loan portfolio. Rick?

Thanks, Mark. Discussing asset quality and portfolio metrics can become complicated when an acquisition is made. To help simplify my remarks this morning, I would like to start with three general comments. The Banner historic portfolio was stable during the first quarter. All key metrics either held steady or improved slightly. The asset quality and credit metrics of the Siuslaw Bank portfolio are what we expected and not materially different from similar markets in our legacy portfolio. And, the combined portfolio has a moderate risk profile, thereby maintaining a key corporate objective. The balance of my remarks will look at key asset quality metrics to underscore our portfolio's moderate risk profile. Net charge-offs for the quarter were $542,000 or 0.014%. Gross charge-offs were concentrated in the agricultural portfolio. These losses were loan specific. With weak farm management practices being the core reason for each loss. While the quality of our agricultural portfolio remains strong, it is fair to note that some segments of the industry are experiencing more challenges than has been the case in recent years. Total non-performing assets did increase by $10 million from the linked quarter and are now 0.57% of total assets. The increase was driven by non-performing loans and REO in the acquired Siuslaw Bank portfolio. However, this level of non-performing assets is two basis points better than the same quarter last year. When, we stressed that our asset quality had attained a moderate risk profile. Classified loans in Banner's portfolio were $80 million versus $81 million at March 31, 2014. Classified loans now represent only 1.9% of total loans versus 2.3% one year ago. Delinquent loans, including non-performing loans were 0.80%. This is an increase from the linked quarter statistic of 0.66%. However, loans 30 to 89 days past due and on accrual, actually, were down nominally from the linked quarter. The reserve for loan and lease losses continues as a source of strength for the Company. Even with another quarter of no provision. And, the Siuslaw Bank portfolio accounted for under purchase accounting rules, meaning that all of the credit metrics disclosed in the press release include the Siuslaw Bank loans. But, do not account for the credit portion of the fair value mark taken against the portfolio. More specifically, the strength of our reserve is indicated by coverage of non-performing loans at a strong 305% and the reserve to total loans at an also strong 1.83%. Even after nine consecutive quarters of no loan loss provision, the acquisition of the Sterling branches and Siuslaw Bank, and the meaningful organic loan growth recorded over that same nine-quarter period of time. While, up $1.7 million from the linked quarter at $4.9 million, REO is still a small asset class for the Company. And, during the first quarter, a nominal gain was realized on REO sales. The historically riskier portfolio segments, construction and land, performed well during the quarter. While, total outstandings in these categories were up, residential absorption rates remained robust. And, larger commercial projects were being completed and refinanced in line with expectations. Be assured, however, that a watchful eye is focused on our markets, looking for indicators of change in market dynamics. And lastly, we continue to benefit from the strength of the Northwest economy. Which, is improving the financial health of our clients. As I have said at the close of my remarks for the last several quarters, we are excited to have achieved and maintained a moderate risk profile for the Banner loan portfolio. This position, along with the Company's strong capital ratios, will allow us to continue executing on our strategic plans which include the integration of AmericanWest Bank. With that, I will turn the stage over to Lloyd for his comments.

Thank you, Rick, and good morning, everyone. As Mark has noted and is reported in our earnings release, Banner Corporation had a good first quarter and a good start to the year 2015. While completion of the purchase and integration of Siuslaw Bank was certainly a highlight of the quarter, our financial performance continued to reflect strong revenue growth driven by solid net interest margin coupled with significant earning asset growth and increased non-interest income, including increased deposit fees and service charges and record mortgage banking revenues. This solid performance followed trends that have been evident for extended periods and continued to demonstrate the strength of our balance sheet and the value of the Banner franchise. Our income available to common shareholders for the quarter ended March 31, 2015, increased nearly 15% to $12.1 million or, $0.61 per diluted share compared to $10.6 million or $0.54 per diluted in the same quarter a year ago. This earnings growth reflects significant organic growth. As well as last year's purchase of six branches on the southern Oregon coast. And, a little less than one month benefit from the Siuslaw Bank acquisition. The current quarter had $1.6 million of acquisition-related expenses which, net of taxes, reduced net income by $0.07 per diluted share. While similar expenses in the first quarter of 2014 were just $45,000. As a reminder, acquisition-related expenses in the fourth quarter of 2014 were $2.8 million, which net of taxes reduced earnings by $0.09 per diluted share. Revenues in the current quarter included a positive net fair value adjustment of $1.1 million which was partially offset by $510,000 of net realized losses on the sale of securities. The net fair value gain and realized losses on the sale of securities were both primarily related to the sale of two pooled trust preferred collateralized debt obligation securities which, had previously been carried at fair value. As I've noted before, our exception is, that fair value adjustments will most often result in a modest net charge which, was the case in both the preceding quarter and the first quarter year ago. As valuation adjustments on our junior subordinated debentures, or trust preferred securities, are normally the principal component of this income statement line. And, increases in the fair value of those significantly discounted liabilities will naturally occur as the passage of time brings them closer to maturity. More important, as Mark already noted, our revenues from core operations, which is revenues excluding the gains and losses on sale of securities and net fair value adjustments, were $59.7 million in the first quarter of 2015 and increase of nearly 2% compared to the immediately preceding quarter. And, more impressively, an increase of $8.3 million or 16% compared to the same quarter a year ago. As I previously noted, this strong revenue generation for the first quarter, was the result of significant balance sheet growth, a remarkably stable net interest margin, additional client acquisition. And, compared to both the preceding quarter and the first quarter a year ago, improved mortgage banking activity. Together these trends clearly demonstrate that our value proposition is being well received. And, that the focused efforts of our employees and the strength of our balance sheet, are combining to produce consistent earnings momentum and add to the value of the Banner franchise. Primarily, as a result of significant growth in the average balances of loans and core deposits, our net interest income increased by $3.2 million, or 10% compared to the first quarter a year ago. Improvements in our earning asset mix and further reductions in our funding costs, allowed our net interest margin to increase to 4.09% in the current quarter and compared to 4.08% in the immediately preceding quarter and 4.07% in the first quarter a year ago. In addition, again this quarter we did not identify a need to reduce net interest income with the provision for loan losses. As all of our credit quality indicators remain strong. Deposit fees and service charges were $8.1 million in the first quarter. A small decrease compared to the fourth quarter of 2014, but an increase of 23% compared to the first quarter a year ago. You may recall that the fourth quarter included $260,000 adjustment related to the under accrual of interchange revenues in prior periods, which added approximately $0.01 to earnings per share for that quarter. Similar to recent quarters the significant increases in these fees and service charges compared to a year earlier is a direct result of our growth in core deposit accounts and related transition reflecting the success of our client acquisition strategies. As well as the branch purchase in June of last year and the more recent merger with Siuslaw Bank in March of this year. The increase in these deposit fees and service charges also reflects the continuing benefit from our decision to move our debit card and credit card relationship to MasterCard in the second half of last year. As reported in the earnings release our mortgage banking revenues were particularly strong contributing $4.1 million to 2015 first quarter revenues compared to $3 million in the preceding quarter and $1.8 million in the first quarter a year ago while this increase in revenue certainly reflects the current low mortgage rates which have supported strong home purchase activity in our markets as well as increased refinancing activity. It also... reflects the incremental production as a result of our continued investment in this line of business. Aside from the acquisition-related expense previously noted, our operating expenses increased compared to the prior quarter largely as a result of cost associated with operating in the ten Siuslaw Bank branches for one month. Compared to the same quarter a year ago, our operating expenses increased more significantly. As we also incurred the expense associated with the 6 southern Oregon branches that were not acquired until late June 2014. In addition the current quarter’s expense reflects generally higher compensation costs and is slightly higher than normal amount of advertising and marketing expense. Finally with respect to the income statement our effective tax rate was 33.8% in the first quarter slightly higher than in recent quarters as a result of our expectation at a greater portion of our acquisition related expenses will be non-deductible for tax reporting in 2015. Of course, our quarter-end statement of condition has been significantly impacted by completion of the Siuslaw acquisition. In particular, Siuslaw Bank contributed $247 million to our consolidated loan totals and $316 million to total deposits as of March 31, 2015. We also recorded $21.1 million of goodwill as a result of the purchase and increased paid-in capital by $58.1 million to reflect the value of the Banner shares issued to the former Siuslaw shareholders. As an aside to these balance sheet changes we are pleased to report that in addition to closing the transaction we have very successfully converted all of the data processing and operating systems and the former Siuslaw Bank branches and employees are all proudly serving their clients under the Banner flag today. Without diving deeply into the loan and deposit balance changes, the details of which are laid out in the earnings release, I would just note a couple of items. First and foremost it’s important to note that both loans and deposit increased by 17% compared to a year ago. And while the acquisitions were important to these increases organic growth throughout the intervening 12 months was substantial and indicative of our successful client acquisition strategies and a value proposition that is resonating with new and existing clients. As you are all aware this increase in client balances is the critical requirement for revenue growth and we remain pleased with the continuing phase of client acquisition. Finally it’s important to note that growth in total deposits continues to reflect even more significant growth in core deposits which increased by 28% compared to a year earlier and in March 31, 2015 comprised of 82% of total deposits. These core deposits provide a stable funding base which will be helpful with interest rates ever do raise. And represent the foundational accounts for relationship banking which is the basis for Banner's Super Community Bank model. So, with those comments, this concludes my prepared remarks. In summary, I will reiterate, that the first quarter was clearly a good start to 2015. A year that will be transformational for our Company and, that we continue to believe that Banner is very well positioned for further success in future periods. As always, I look forward to your questions. Mark?

Thank you, Lloyd, and thank you, Rick, for your comments. That concludes our prepared remarks and Allison will now open the call and we welcome your questions.

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Jeff Rulis from D.A. Davidson. Please go ahead.

Thanks. Good morning.

Good morning, Jeff.

Hi, Jeff.

So Lloyd, I guess I'm trying to get into the core expenses and I guess if you back up the merger costs just over $40 million for the quarter. Heard your comment about a few expenses a little higher core-wise in Q1 and then if you layer in Siuslaw for the full quarter maybe the question is Siuslaw added what to that expense base in the quarter? And could we just assume that just two more - well, for a full quarter we can just annualize that and get into the base core expense rate or level?

Jeff, I don’t have the Siuslaw number off the top of my head. I apologize for that. But it was 30 days of expenses, so obviously there will be an increase going forward. But as I noted and that's evident in lines like occupancy which you can see was up by about $300,000 quarter-over-quarter and the information systems and so it's embedded in all of those line items. The other one that I would note is compensation was up and as we noted we had a good first quarter, an exceptionally good first quarter actually in mortgage origination and there's certainly expense associated with that as well. So I apologize. I don't have that one number off the top of my head and I would be shooting from - if I gave it.

Safe to assume if you just took the legacy size a lot quarterly rate and just took a third of that you'd get close to that and then…

You would get close, obviously we expect some expense savings over time because there has been some changes in staffing as a result of that. And none of those types of synergies were realized in that first 30 days, but they will be as we roll forward.

Okay, maybe broadening it out a little bit and bringing in AmericanWest to the equation, I guess, are there some efficiency ratio goals that you’ve - that post the conversion of that that you're angling towards or a percent of assets, expense to assets or something that we could kind of down the road point to where you'd like to get to?

Well, as we’ve noted a number of times, efficiency is something that we certainly want to improve on, but we'll never be an efficiency ratio leader if you will. Having said that we've been pretty consistent in suggesting that we'd like to get in that 62% to 65% efficiency ratio and to get there I haven’t done the math exactly, but you need to drive that operating expense to average ratio down closer to 3%. We've been running around 3.25 level for an extended period of time and certainly the growth that we enjoyed with the Siuslaw acquisition and with organic growth and the branches down in southern Oregon is getting us a bigger asset base to spread some of those expenses over and the AmericanWest transaction will do the same. But as I've cautioned before, it, the conversion and acquisition expenses associated with that are going to bleed through the quarterly results for some period of time. We'll continue to highlight them as we have in this quarter, but ultimately again we need to drive that ratio below that 65% with the expense to average assets down closer to 3%.

Jeff, this is Mark. That's not going to be expected until obviously the first full year. So the other way we're kind of approaching this and you get to the number of 62% to 65% longer term efficiency ratio is having a positive operating leverage for the company. If our revenues are growing at 16% and as you can see in the release our core expenses are growing at about 13% we're generating core positive operating leverage for the company and that should drive the ratio. To the extent you don’t get the client acquisition in the revenue growth associated with it. That's when you get a little bit more draconian with expense.

Got it. Okay, and then on the updated timing of the anticipated AmericanWest close now in early Q3. Is that push the expected - I know we're getting ahead of ourselves but expected conversion date do you anticipate that by year end 2015?

This is Mark, Jeff. I think what we are going to is be certain that there is a little client impact in the conversion as possible and as you know the closer you get to year end the more opportunity there is for client disruption as well as internal processing issues for year end. So it would not - I would not be shocked if I were you to see that we would move that conversion into first quarter.

It make sense, okay I will step back thanks.

Thank you, Jeff.

The next question comes from Don Worthington from Raymond James. Please go ahead.

Good morning everyone.

Good morning, Don.

I wanted to get some color on the mortgage banking in terms of Lloyd you mentioned that both refi and purchase were strong. Do you have a breakdown between the two in terms of originations?

I do Don, good morning. Refinance was about 48% of the origination volume this quarter and that’s up from about 30% in recent quarters so obviously the decline in mortgage rates played a factor in the volume there. Revenue from that line of business was margins were again very strong this quarter which is reflective of the decline in interest rates as well. So but the production volume was actually up quarter-over-quarter. So it was not just a refinanced wave by any stretch the imagination and continue to stayed focused on purchase activity and housing markets in our areas of remained very robust.

So as mortgage banking activity state fairly healthy so far in Q2?

Yeah, I think the pipeline is still quit full, certainly better than it was a year ago and as I noted we continue - have continued for sometime to invest in the business line and by that specifically I mean adding additional production capacity and personnel. So we would expect to see that business continue to prosper.

Okay great, thank you.

Thanks Don.

The next question comes from Russell Gunther from Macquarie. Please go ahead.

Hey good morning guys.

Good morning, Russell.

I appreciate the color you gave on the loan portfolio trends in the quarter and I just wanted to follow up on the pipeline. I know you guys don’t quantify, but could you give us sense for directionally where the pipeline went quarter-on-quarter and what maybe some of the drivers would have been there?

Russell, this is Rick Barton.

Hi, Rick.

Taking it by portfolio segments, Lloyd has already covered the mortgage banking pipeline so I won't repeat that. The CRE pipeline remains quite full whether we're looking at residential construction, or commercial loan products. I would characterize it as equal to if not slightly greater than it was this time a year ago. And frankly, one of the challenges is picking and choosing the right projects to do and not finding ourselves being over concentrated in any product type or geographic area. Also we don't want to get over our skis and get ahead of the ability of our staff to properly manage what we have on the books. The commercial pipeline I would characterize as improved from last year with the strength of the economy in the Northwest, I think we are beginning to see greater borrowing needs on the part of our customers and because of that we are enjoying some additional success in the C&I arena.

That’s really helpful. I appreciate it. I guess just so the net, net, quarter-on-quarter how would you characterize the loan pipeline and in the aggregate?

I would characterize it as that.

Okay. That’s great, thank you. Guys just moving to the margin if I could real quick continues to defy my expectations and Lloyd, I know you've been talking about this for a long time. Congrats to everybody on that performance. I just want follow-up on margin guidance you guys have given previously given that we are little closer to the AWBC close would you still expect sort of 10 to 15 basis points dilution to the margin at closer or has that shifted at all.

This is Lloyd. No, our expectation there hasn't shifted. I think 15 is better number than 10, probably pleased if there because their core margin excluding purchase accounting adjustments which have been significant in their operations over the last few year, core margin is quite a bit lower than ours, so we can hold it to a 15 basis point decline I think we would be pleased with that obviously we will have a lot more volume that we are spreading that out.

Sure.

And you are right, I have cautioned about the impact of low interest rates on the margin for an extended period of time, we continue to - our teams continues to surprise me. How is that?

That’s fair. And you guys have been quite clear about expectations, you don’t expect much noise in the way of purchase accounting accretion do close AWBC is there any benefit from that in that 10 to 15 of NIM dilution or is that absent any purchase accounting accretion that made materially?

No, there will be purchase accounting accretion as a result of that transaction it won’t be large but it will add basis a number of basis points to that margin and isn’t factored into to my 15 basis point decline expectation there.

Okay, that’s very helpful. Thank you. And just last one for me with regard to capital management, I saw the by back approval for the quarter, is that something that we could see in the back half of 2015 and is it - if that sort of avenue for continued prudent capital deployment as you digest a bunch of these pending deals or which you consider doing in other deal while you are kind of chop in with on the integration of AWBC?

Russell this is Mark. As we have said before, we want to have the availability and resources to deploy capital in the most prudent way possible and that means that we want all tools available to us and certainly a share buyback having that tool as part of capital management going forward as critical. I would not anticipate any type of - we have not utilized it currently and I would not suggest that we will utilize it in 2015. However it may become prudent to do a share buyback sometime next year unless again that we have adequate use or that deployment of capital which clearly would be continued reimbursement to franchise and/or select an opportunistic M&A.

Great. All right, thanks Mark. Thanks everybody. Appreciate the help.

Thank you.

You bet.

[Operator Instructions] Your next question comes from Jackie Chimera from KBW. Please go ahead.

Hi, good morning guys.

Good morning Jackie.

What exactly was the timing of the Siuslaw conversion?

Jackie, this is Lloyd. The transaction closed on March 6 and we converted over that weekend.

Okay.

And it worked out very well to be able to close and convert on the same weekend. That’s not always the case and by doing that you avoid some of the interim procedures that have to be put in place if you are not able to do that. So it was very successful as I noted conversion and a lot of hard work and effort by lot of people to pull it off, but as Mark as pointed out minimal client disruption and we are really pleased that operation is functioning today very smoothly as if it had been part of the organization for sometime.

And Jackie, this is Mark. I think one encouraging light that we see is the employees that joined Banner from the Siuslaw banking operation have done a phenomenal job in handling client relations and the retention, client retention numbers are exceeding our expectation and then actually, we would anticipate some pretty sizable growth numbers here going forward.

Good. That all I got to hear. So that’s fitting in nicely than with the branches you acquired from Amcor mid last year?

Yes.

Okay. So is it fair to say since you had almost a month after the conversion that 2Q should provide us with a pretty good base run rate absents the third quarter AmericanWest transaction? Most of the cost saves came out in March?

Mark shaking his head, yes I am not fully understanding your question as I pointed out we didn’t achieve much and we have cost saves in March.

No, I just mean that most everything that you have done in terms of the transition and everything else have took place during March, so there wasn’t much spill over into April and beyond, so most of the cost savings that you are expecting to have we should get a clean run rate in 2Q because they were taking care of in March so that didn’t hit the income statement.

That is generally correct.

Okay.

I will make a point that the acquisition related expenses that we reported in the first quarter included expenses related to Siuslaw obviously, but also included the expenses related to the AmericanWest transaction and we will continue to see similar expenses related to that transaction in the second quarter, third quarter, fourth quarter and actually first quarter of next year I’m sure as well.

Okay.

So yes I think the second quarters run rate on the core is going to give you a good sense of what we look like without AmericanWest. And then you have any - Americanwest into the equation going further from there.

Okay, and was AmericanWest planning on I know the greater Sacramento deal closed in February, are they stripping out any costs from that transaction or will that primarily began with that…

No, they have been able to consolidate the number of the platform although not the conversion costs, not the systems but personnel certainly. So they may able to gain some efficiency from that.

And do you know to what extent that will be captured in there when they put out the rate data for the first quarter? Do you know to what extent that will have a run rate? And was it - or was it probably more end of the quarter type thing.

No it’s about mid-February. So not a half a quarter and of course in the regulatory reporting the acquisition related expenses - the one-time expense if you will, will be hard to identify in regulatory reports.

Okay, so probably better to just use the December, the two separate companies and they expect there would be a little bit of cost savings from the greater Sacramento piece?

I think just good approach to it, yes.

And remember Jackie they remember the both cost associated with the processing platforms there have been any conversion there. So there is still - that will occur we don’t too disruptive client based are twice. So they will convert on to our platform first.

Okay great thank you guys both very much for the color.

Thanks Jackie.

Having no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Mark Grescovich for any closing remarks.

Thank you, Allison. As I stated we are pleased with our solid first quarter performance and see it as evidence that we're making substantial and sustainable progress on our disciplined strategic plan to build shareholder value by executing on our super community bank model, by growing market share, strengthening our deposit franchisee, improving our core operating performance, maintaining a moderate risk profile, and prudently deploying excess capital. I would like to thank all my colleagues who are driving this solid performance for our Company and it consistent performance. Thank you for your interest in Banner and for joining our call today. We look forward to reporting our results to you again in the future. Thanks everyone.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.